A testamentary trust is simply a trust that is set up at someone’s death. Its terms are usually set out in the person’s last will and testament—which is where the name comes from.
There are many kinds of trusts, designed to serve all sorts of estate planning purposes. All trusts, however, can be categorized by whether or not the person who sets them up (the settlor) creates the trust while he or she is alive. Trusts created by a living settlor are called "living trusts". Trusts created at death are "testamentary."
Many wills contain provisions for trusts. Usually, these trusts are intended to make sure that an inheritance is managed for beneficiaries who can’t, for some reason, manage it themselves. The trusts may or may not come into existence when the will-maker dies, depending on the circumstances.
Trusts for children, for example, are commonly set up in their parents' or grandparents' wills. A father might use his will to leave all his property to his wife and name their young children as alternate beneficiaries; they would inherit only if his wife didn’t survive him. But since the children are all under 18, if they inherited, an adult would have to manage the money for them. Creating a trust is a way to take care of that possibility. The father can set out the terms of the trust, name a trustee (someone who will be in charge of trust assets), and state that if the children are under 18 (or 25, or any other age he picks) at his death, the trust should be created. If they’re past the age he specified, they would inherit the property outright.
Similarly, a parent might want to leave money to an adult child, but might not trust that child to handle the money wisely. A parent who makes her will when her son is an immature 23 might provide that if he inherits property before he’s 35, it should go into a trust. When he turns 35, the trust would end; she just hopes he’ll have become more responsible by then.
Another parent, whose child has a serious problem with addiction or mental illness, might provide for a special needs trust that could last the child’s whole life.
It’s hard to generalize about the job of trustee of a testamentary trust, because there are so many different kinds of trusts. But if you’re the trustee of a child’s trust, you may have years or decades of work ahead of you. You’ll need to file income tax returns for the trust each year, invest trust property sensibly (following state law and any instructions in the trust terms themselves), keep careful and complete records of all transactions, and keep the beneficiary informed about your management activities.
The hardest part of serving as trustee, however, may be making spending decisions over the years. When the beneficiary asks you for money, it will be up to you—relying, as always, on the instructions in the trust document and your own good sense—to say yes or no.